DRAFT FOR DISCUSSION ONLY
Discussion Paper
on
Specifications and Guidelines for the United Nations
Framework Classification for Fossil Energy and Mineral
Resources (UNFC 2009)
Table of contents
PART 1 – Preamble .......................................................................................................... 1
Introduction .................................................................................................................... 1
Requirements for quality ................................................................................................ 2
Commodity specific specifications ................................................................................. 3
Application specific specifications .................................................................................. 3
Local specifications........................................................................................................ 4
Development Process .................................................................................................... 4
Approval Process........................................................................................................... 5
Maintenance Process .................................................................................................... 5
Part II – Needs to be met by the classification and its specifications ................................. 6
Part III Recommendations ................................................................................................. 6
Appendix I
List of Members of the Revision Task Force .................................................. 6
Appendix II
Memorandum of Understanding between UNECE/AHGE and SPE ............... 8
PART 1 – Preamble
Introduction
The purpose of this paper is to discuss the requirements of stakeholders for secondary rules
under the UNFC, here called the UNFC Specifications.
The paper has been prepared at the request of the UNECE Ad Hoc Group of Experts on
Harmonization of Fossil Energy and Mineral Resources Terminology (AHGE) by members of
its Revision Task Force (RTF).
The specifications must be seen in connection with the principal needs that the UNFC aims
to meet. These are:
1. The need to produce international mineral and energy studies in support of long
sighted and robust policies and strategies – The International Mineral and Energy
Studies needs.
2. The needs of Governments in implementing their policies through their resource
management – The Government Resource Management Needs.
3. The needs of industry in managing their business processes to serve their host
countries, shareholders and stakeholders – The Business Process Management
Needs.
4. The needs of the financial community in allocating capital efficiently so as to reduce
the capital costs to a minimum – the Financial Reporting Needs.
While the UNFC is structured to meet these needs in an elegant way at a high level, further
specifications are required in order to secure that inventories hold information of required
quality. Some specifications are generally applicable, some are commodity specific, some
are related to the particular application and some may be required to relate the UNFC to
local legislation, organisations or practises.
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Requirements for quality
The requirements for quality in the UNFC inventories are similar to the relevant requirements
that apply to statistical information in general as is currently being researched by the UN
Statistical Division in its establishment of the International Recommendation for Energy
Statistics (IRES).
Quality requirements of importance for the formulation of specifications under the UNFC are:
Relevance. The information to be read from the UNFC should meet the real needs of users.
Reliability1. This refers to the confidence that users place in those data based on respect for
the responsible agencies producing the data. For the UNFC this translates into assuring that
the categories used can be reliably determined on one hand and that the forecasts are
reliably reproduced over time on the other. The former may require specifications on how the
categories should be understood in detail, while the latter would require a governance of the
UNFC that promotes a common understanding of it in time and space, and also that any
changes to it are managed in such a way that its reliability over time is not compromised.
Audits, look backs and verification against updated forecasts and, eventually, against actual
production provide the ultimate test of reliability and should be provided for.
Coherence. The coherence of fossil energy and mineral inventories reflects the degree to
which the data are logically connected and mutually consistent. That is to say, the degree to
which they can be successfully brought together with other statistical information within a
broad analytical framework and over time. The use of the UNFC itself promotes coherence,
as does the use of a common methodology across surveys. Coherence has four important
sub-dimensions:
(i)
Coherence within a data set. This implies that the elementary data items are
based on compatible concepts, definitions and classifications and can be
meaningfully combined. For the UNFC, this means that the recoverable quantities
are related to defined projects from which other relevant information may be
obtained, such as costs, production over time, cash flows etc.
(ii)
Coherence across data sets. This implies that the data across different data sets
are based on common concepts, definitions and classifications. The coherence
between fossil energy and mineral statistics and other statistics (e.g., economic,
environmental) will be ensured if data sets are based on common concepts,
definitions, valuation principles, classifications, etc. The UNFC is designed to
facilitate this through its project-based approach.
(iii)
Coherence over time. This implies that the data are based on common concepts,
definitions and methodology over time.
(iv)
Coherence across preparers and users. This implies that the data are based on
common concepts, definitions and methodology across preparers and that the
users understand and use them in the same manner.
Materiality. It follows from the requirement for relevance that there be a requirement also for
materiality. This will ensure that issues of material importance are reflected, and that
immaterial detail is not allowed to derail the efforts of producing essential decision support.
Ease of preparation and of use. This implies that:
 The UNFC and its specifications maintain their strong logical rigor, clarity of
form and briefness in formulation of necessary rules;
This is related to the term “credibility”, used by the UNSD or “assurance of integrity” used in the IMF
Data Quality Assessment Framework
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
Arrangements are in place to allow preparers and users to share best
practices2 with respect to preparing and using UNFC inventories in elegant
ways providing a maximum of benefits for a minimum of effort.
The quality requirements are not met easily. In some instances they may be in clear conflict
and a compromise must be sought, or at worst, one or more of the criteria must be sacrificed.
An attribute may for instance be highly relevant for a certain application, but may not be
reliably determined3.
Other general requirements
Integration of classifications: The detailed integration of other classifications into the UNFC
should be reviewed. When possible and necessary, specifications should be developed to
ensure a one to one relationship. This could be done in the form of specifications to the
UNFC or to the other classification.
Reporting of uncertainties. Specifications are required to:
 further standardise the reporting of uncertainty in the quantity that a given project will
produce using the G-axis; and
 further standardise the reporting of uncertainty in that a non-committed project may
or may not materialise and correcting the estimates of recoverable quantities of a
portfolio of projects for this.
Defining the reference point at which recoverable quantities are measured or estimated. The
reference point is the interface with other statistical information describing the surface use of
the recoverable quantities. It is also an important point in defining the resource in terms of
quality, quantity (and thereby value), and in securing material balance in the resource
accounting. The initial in place quantities of a non-renewable resources must equal the
quantities remaining in the ground when extraction ceases plus the quantities that have been
brought past the reference point(s).
Commodity specific specifications
Physical differences between commodities and/or incompatible traditions may require
commodity specific specifications.
Application specific specifications
In order to keep the UNFC relevant for the four principal applications, it will be necessary to
examine the requirements that they have and to design specifications to meet them. These
specifications should, to the extent possible be formulated to provide relevant information
also to the other applications4.
2
through guidelines or otherwise
The classical example is the value of a recoverable quantity. This requires information on future
social and economic conditions, including market prices that may not be reliably determined. When
researching specifications to deal with this issue it would be natural to consider the introduction of
standard social and economic conditions of some form, which would make the value less relevant,
objectively speaking, but more reliably determined and also more coherent. Alternatively, reliability
and coherence could be sacrificed to retain relevance.
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An example is the requirement that investors have for coherence in the form of comparable numbers.
This may require that recoverable quantities be calculated for a standard set of economic and social
assumptions. However, the other three principal applications also have a requirement for
comparability. The research required to define the specifications for financial reporting needs should
therefore also consider the need for comparability in energy and mineral studies, in Government
resource management and in industry’s business process management.
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Local specifications
The UNFC is designed to meet the new needs of a globalising economy. It respects that
financial markets are global, and that commodity and energy markets are partly global. It
also recognises that material partnerships in the development and production of fossil
energy and mineral resources often are transnational and woven together globally. The
activities are however always local, and must respect national legislation, company
procedures and so on. The UNFC can be adapted to many of these needs by a structured
subdivision of the categories, by aggregating them in a standard manner or by both.
The Development Process
A strength of the UNFC is its capacity to harmonize classifications as is demonstrated in the
Mapping Task Force Report. This offers the advantage of examining the classifications that
have been mapped to the UNFC, and to adopt the elements contained in them that may
serve as adequate specifications under the UNFC.
If such a process of “linkage” through harmonized terminology is adopted this could
eliminate the requirement for the development of new commodity-specific spcifications, to
the extent that these already exist as integral parts of the specifications mapped to the
UNFC.
However, it is recommended that a task force be assigned to do the research required to
formulate specifications and to submit their recommended specification to the AHGE. This
documentation would then also include an explicit link to the relevant publications of
CRIRSCO, SPE/WPC/AAPG/SPEE and others for commodity-specific specifications and, to
the extent necessary, explanations of the correspondence between the high-level
harmonized generic terminology and that applied at the applications and commodity-specific
level.
The development process for petroleum specifications and guidelines has been agreed in
the Memorandum of Understanding (of 2006) between the UNECE and SPE (enclosed).
Here the responsibilities of the AHGE are to:
1. Provide a forum of stakeholders to assist in defining the needs to be met by the
Texts5 and ensure the deliberations resulting from the meetings of the Ad Hoc Group
are provided to the SPE OGRC for the continuing development of Texts.
2. Include a representative of SPE on the Bureau of the UNECE Ad Hoc Group of
Experts.
3. Select a representative to participate in OGRC development of the Texts;
4. Respect the technical decisions of the SPE in development of the Texts by
conducting a due process through which the UNECE Group of Experts may
recommend or not the application of the Texts generally, and through which each
individual stakeholder may, on an informed basis, accept or reject the
implementation of them under their authority
5. Promote collaboration with member countries, the petroleum industry, international
standard setters, (including standards organizations), regulators and other
international organizations in considering applying the recommended Texts in
applications of interest.
6. Provide a venue for a joint meeting with the Task Force on Solid Minerals at least
once a year. This will be Geneva unless all parties agree differently.
5Specifications
and guidelines for the application of the UNFC, and the SPE/WPC/AAPG definitions
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The Approval Process
Defining an acceptable approval process for specifications is a critical component of both
implementation and maintenance. There has to be a well-defined and completely
transparent system for approving the specifications when first adopted and for subsequent
updates, and also for facilitating the provision of timely responses to interpretation queries
on an ongoing basis.
The AHGE/SPE MoU documents how this is arranged for the petroleum-specific
specifications. The objective is clearly to protect the rights and responsibilities of the
interests involved. From a practical standpoint this agreement would seem to provide a fair
and reasonable basis for an approval process. It is a formal and integrated arrangement
whereby all stakeholders are duly represented, and which ensures that the rights and
obligations of the individual participants are fully protected.
A similar arrangement with CRIRSCO could potentially address the requirements for
commodity-specific specifications and guidelines for the minerals sector.
Two issues that require further clarification are:
i)
ii)
The current structure of the AHGE, while clearly transparent, is not viable for
representative decision-making purposes as it operates on a consensus basis.
There is a need for a “body” that can take responsibility for addressing
interpretational queries on an ongoing basis. A formal structure, which could be
established under the auspices of the UNECE, would be able to provide a single
contact point for such questions, which could then be channelled to the appropriate
group (depending on the commodity concerned) for recommended decisions and
provide the assurance that pre-agreed governance and approval controls were
followed.
The Maintenance Process
Maintenance would be accomplished through a similar process to that recommended for
initial approval, since any changes would need to be subject to the same controls.
Proposals for changes could be submitted to the body that facilitates interpretational queries
and then dealt with either on an ad hoc basis or, probably better, put forward for
consideration by the stakeholders on an annual basis. This would include examining
proposals for adapting the UNFC to local requirements, and ensuring that like adaptations
are formulated in a like manner and unlike adaptations are formulated in an unlike manner
across the various constituencies requiring them.
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Part II – Needs to be met by the classification and its specifications
This part would include further justifications for the recommendations below. Some basic
elements were circulated for the London Meeting, supplemented by the task forces at and
after the meeting.
Part III Recommendations
This should be the TOR for a specifications task force. It should be in a form:
The RTF recommends the nomination of a Specifications Task force to cooperate with the
SPE Oil and Gas Reserves Committee (The AHGE Task Force on Petroleum) to research
and propose specifications under the UNFC to the AHGE at its annual session in 2010.
The specifications should meet the following general and application specific needs:
1. Ensure that the requirements for relevance, comparability, coherence, materiality and
ease of preparation and of use are met for all applications and all commodities.
2. ….
3. For mineral and energy studies applications… something on completeness and
aggregations?
4. For Government resource management applications…
5. For business process management applications… elaboration on the visibility,
communication and use of optional projects, valuation? etc..
6. For financial reporting applications.. see D. Elliotts paper..
7. For the petroleum applications, ensure that:
a. Exploration potentials are categorised with respect to the nature6 and or
maturity of the exploration project, the probability that an economically
exploitable discovery will be made and the uncertainty in the recoverable
quantities given that a discovery is made.
b. ….
c. ….
8. For xx application …
9. For artisan mining applications…
10. For…
Appendix I
List of Members of the Revision Task Force
Extended Bureau members:
Thomas Ahlbrandt
Fatih Birol
Per Blystad
Ferdinando Calzolari Camisani
David Elliott
Mucella Ersoy
Mohamed Hamel supported by Nimat B. Abu Al-Soof
Sigurd Heiberg (Chairperson)
Delores Hinkle supported by John E. Ritter
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The Specifications Task Force may wish to consider the merit of categorising petroleum exploration
in the common form of play, lead and prospect or some other commonly used manner such as
infrastructure led exploration, growth exploration and wildcat exploration. Due regard should be paid
to the requirements for ease of preparation and of use. This will limit the complexity of the
categorisation to what is easily absorbed and understood by a first user of the classification in the
span of time normally allowed for learning to use it.
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Andrej Subelj
Yuri Podturkin
Selected representative experts
Istvan Berczi
Glenn Brady
David G. MacDonald
James G. Ross
Niall Weatherstone
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Appendix II Memorandum of Understanding between
UNECE/AHGE and SPE
The agreement will be included in full here. That has not been done in the draft as the
text is on the AHGE web site and well known to all. It is more practical to do the
drafting on a smaller file.
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